Sea, one of Southeast Asia’s largest internet companies, has released its full IPO prospectus containing a treasure trove of previously private information. It is looking to raise US$1 billion.
Among the highlights in its financial statement: dramatically increasing revenue, but an equally dramatic widening in its net loss.
The bottom line comparison between H1 2016 and H1 2017 give a hint of what is to come. Sea’s net loss doubled to US$153m during that time period, while revenue only grew 17 percent. It’s a familiar pattern seen in most major internet companies in Southeast Asia as they
It’s a familiar pattern seen in most nascent, fast-growing internet companies in Southeast Asia who spend cash at a rapid clip to gain market share, in the hopes of achieving dominance which will then translate to profitability.
It had US$651 million in cash and cash equivalents on June 30, 2017.
Sea acknowledges that there’s a risk it “may not achieve profitability in the future.” It attributes its rising net loss to sales and marketing costs, which include promotions and shipping subsidies for the users of Shopee, its ecommerce business.
Its challenge will be to lower customer acquisition costs against better-funded competitors.
The company adds that most of its revenue comes from its online entertainment business, Garena. As of 2016, that segment made up 95 percent of the top line. However, Sea claims to be the number one player in the region in all its categories.
It has yet to prove that its dominance in gaming can translate to building sustainable payments and ecommerce businesses at scale in Southeast Asia. But no one else has done it either.
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